Welcome to the world of digital innovation
Ride sharing phenomenon Uber has gone from a start-up to a US$50 billion company barely seven years after it began, all without any major investment in IT. Instead, Uber has leveraged cloud storage and mobile applications with geospatial mapping from Google, all of it conceived around a compelling business model which saw an opportunity in the market.
“Welcome to the new world of digital innovation,” said Jim Fagan, Telstra’s Hong Kong based Director of Cloud Practice and Global Enterprise Service.
In this world, technology is simply an enabler for great business ideas, which spring from innovative cultural environments within leading organizations.
“If Uber had tried to do the same thing 10 years earlier they would have had to have gone out and raised US$100 million or so and invest in servers and data centers,” said Fagan. “The technology has taken out the costs and made it easier, but essentially it was driven by the business model first.”
Be bold for disruption
In this fast changing environment, Fagan said, businesses in Asia need to be bold enough to “disrupt themselves” to drive innovation.
For organizations which are cloud-native and have no legacy issues, this is more achievable, but established organizations are doing this too.
“A few years ago people were saying ‘disruption won’t happen in my industry,’ but today everyone understands they have to move. For many organizations it is hard work to go back and change your processes and drill down and get the buy in from every person,” he said.
Established organizations in Asia are exploring the “disciplined two-speed approach” to digital disruption. They are running their old business models while they develop and roll out a new one.
“There are areas where you might want to move into new markets and new places, and these are the ones you want to start rolling out with a digital business,” he said. “You need to keep testing every day to learn from failure and keep pushing out.”
Fagan cited online streaming company Netflix as a good example of this.
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Netflix is now best known for its – cloud enabled – streaming of movies and television programs in many countries, but when it began in 1997 its core business was in sending physical DVDs through the post.
“They had the foresight to change, and the cloud was the enabler to underpin it,” said Fagan.
Two–speed approach in reality
For many established organizations, the reality is their legacy business is likely to “pay the bills” while the digital transformation takes place.
Often what will occur is that, over time, the legacy business will come under pressure, but if a new growing digital business has been developed as the legacy business starts to be disrupted, then the sustainability of the organization can be achieved.
Fagan said Telstra is part of this transition, as it moves from a telco carrier on a journey to becoming a world class technology company. “For us, this means we are going to change our thinking about so many of the things we do,” he said.
For CIOs, the new environment is also transformative.